AOL’s Moment: A Tale of Two Outcomes

Since the first news alert hit my in-box on Monday morning I’ve been trying to decide how I feel about the acquisition of Huffington Post by AOL. I’ve come down squarely on undecided: there are at least two very clear, very different outcomes possible.

One justification for the deal (which reportedly cost AOL nearly half of its cash) is that it will create a whole lot more page views that AOL’s sales team can then monetize. As I said in this space back in June, simply growing page views is a flawed strategy. Even though there’s been much reporting of AOL’s audience attrition with the evacuation of dial up customers, I don’t believe that scale is what truly matters here. If AOL simply applies the same advertising-based monetization strategies to a new slice of inventory, then this ends up being a $350 million search optimization deal.

The Drift is proudly underwritten this week by Krux Digital, which gives websites a platform to safeguard, manage, and make responsible use of consumer data signatures across multiple devices, sources, and formats. Find out how.

On the other hand, Huffington Post is also valued for the strategy and style with which it aggregates content and generates outsized social media impact. Let’s call this the “Arianna’s got it figured out” scenario. If Tim Armstrong really hands her the keys — and if she can get the car running — AOL may become a lean, mean content machine, generating the content that the web ends up talking about, forwarding, rating, tweeting. If you believe “all media will be social” then you like this approach. In this scenario, AOL actually does “reinvent” journalism for the digital age (or at least begins deploying its replacement).

Tim may have used the first scenario to justify the deal to investors, but the second is the one that will not only save AOL but give it the chance to once again be a leader in marketing. But nothing in this deal will do any good at all if…..

AOL’s vision is limited to “advertising” revenue. No brand is lying awake because there are too few places to advertise. The future is about spawning marketing services, getting ever closer to brands and businesses. As it resets its editorial voice, AOL must also rebuild itself as a business platform.

The dead-enders end up winning. Looking back across the history of M&A at AOL, you can’t say this is a company that’s been able to extract value from what it buys. Is Arianna Huffington the visionary that breaks the cycle? Or does she get swallowed up in the same black hole of bureaucracy and corporate inertia that’s driven out so many before her?

Let me be clear: I’m pulling for AOL, for Tim Armstrong, for Arianna Huffington. I’m applauding Tim and his regime for their willingness to make a big bet. But now it’s time to burn the ships and leave absolutely no room for retreat. If this works, its one of the greatest turnarounds ever, spawning perhaps the web’s first truly great content play. AOL, this is indeed your moment.

3 comments

Clearly this is the question of the week that everyone’s asking each other, and once again, you’ve given an articulate, well thought out answer. Next time I’m asked what I think about this deal, I will simply forward this link!!

I am going to submit another wrinkle to the motivation behind this acquisition — ego.

I worked for, and learned a lot from Tim Armstrong — and this acquisition puts TA into another atmosphere of conversations he was not considered for, until he bought this high profile chaperone. And judging from the CNN interview I saw, Tim needs to step aside and let Arianna do the talking for this to work out for him and for AOL — he is a great make that a phenomenal salesperson and a great leader, but sales metaphors like “we have an open business model and we’re gonna throw to the open receiver” fall flat and lack any substance. This buy was about more than page views and ad impressions and as much as I see your point in adopting the approaches that Huffington Post have made successful in the content space — deploying them across other content properties under the AOL umbrella becomes problematic. This acquisition was about Tim Armstrong more than it is about AOL.